Prime Minister’s Economic Advisory Council (PMEAC) said the RBI move to infuse liquidity in the system is “more potent” than a cut in interest rate and it will help banks expand credit portfolio.
“The RBI has taken a cautious step. The latest data on inflation has not been encouraging. Under the circumstances, I believe this (25 bps reduction in CRR) is the maximum the Reserve Bank could have done,” PMEAC Chairman C Rangarajan said.
According to Rangarajan, a reduction in cash reserve ratio is “more potent than even an announcement regarding policy rate” as the move will provide some additional liquidity and enable banks to expand their credit portfolio.
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